|Duty-Free Sales No Longer Free|
|Subject||Market Intervention Taxes|
|Topic||Government and the Economy|
|Key Words||Duty, Tax, Harmonization, Price, Sales, Jobs, Revenues|
The European Union has now ended the fifty-year-old practice of allowing cigarettes, alcohol, cologne and other goods to be sold free of duty to air and sea travelers within the European Community. The justification is that the tax break benefited those who travel a lot, such as well-to-do businesspeople, and was inconsistent with the principle of tax harmonization.
Although many people took short ferry trips from England to France mainly to buy cheaper goods just before the policy changed, the reaction of consumer groups has been relatively muted. While duty could amount to as much as 75 percent of the price of alcohol and cigarettes, the duty-free shops did not reduce their prices accordingly.
The Scotch Whisky Association predicts that scotch makers will lose $215 million in sales each year, and that 1,000 jobs will be lost. Ferry companies are also likely to lose out because over half of duty-free sales occurred on ferries. Eventually, airports and ferry companies are expected to find other ways of increasing revenue, such as by attracting more varied stores.
(Updated August 1, 1999)
|Source||Thomas Grose, "Duty-free sales end for Europe," USA Today, June 29, 1999.|
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